EIU Global Forecasting Service

Several factors are contributing to keeping oil prices range-bound

January 18th 2018

Global oil prices have risen fairly quickly in recent months, holding just below the US$70/barrel mark in mid-January—the highest level in three years—driven by clear signs of tightening global supplies, as well as by rising political uncertainty in the Middle East. Despite this recent growth, The Economist Intelligence Unit expects global oil prices to remain largely range-bound in 2018‑19 as OPEC's efforts to constrain global supply are partially offset by rising production from non-OPEC producers, most notably the US. However, the range within which the price of dated Brent Blend, the international benchmark, is likely to fluctuate has been raised, to around US$60-70/b, as the global market appears to be returning to a fragile balance. At their summit on November 30th OPEC members and their partners, notably Russia, agreed to extend the existing production-cut agreement until the end of 2018, in order to mop up the remaining excess supply. Markets had largely priced in an extension of the deal, so OPEC and its partners were under considerable pressure to reaffirm their commitment in order to avoid a sell-off by investors.